You can use numerous methods to set up your ownership if you wish to own property with one or more people. Tenancy in common and joint tenancy are two options for holding title to a piece of property with someone else. These serve the same purpose of enabling two or more persons to have property jointly, yet they differ significantly in several important ways. If you are looking forward to buying/renting your property, ensure you get the service of reliable and leading letting agents in Liverpool.
What is Joint Tenants?
Joint tenants are a group of persons who each possess an equal portion of a piece of property. However, equal ownership entails equal liability. Therefore, all tenants are responsible for making payments if one tenant owes money on the property. If your partner is incompetent with money management, this can be one drawback of the joint tenancy. However, any earnings the property makes are likewise owed to all stakeholders.
Each tenant receives a fair portion of any cash generated by renting or selling. Joint tenants frequently enjoy the right of survivorship as well. When a tenant passes away, a co-tenant with this right instantly takes possession of the deceased’s portion of the property. Because it enables property owners to avoid probate, joint tenancy is most prevalent among married couples. With joint tenancy, a partner’s Last Will would be able to undergo a court review process, which may take months or even years.
What is Tenants In Common?
As opposed to joint tenants, tenants in common may hold different percentages of a property. Additionally, tenants in common frequently lack survivorship rights. One owner’s stake in the property does not immediately pass to the remaining owner(s) in the event of their death. Consider that Adam, Peter, and Stacy all share ownership of a home. Peter holds a 30% stake, Adam 50%, and Stacy 20%. What transpires then if one of the tenants in common passes away?
The recipient listed in their Last Will and Testament receives their interest in the property. Thus, Peter and Stacy’s ownership interests in the property remain the same even if Adam passes away without naming them in his Will. Adam’s assets are divided by state intestacy laws if he fails to leave a last will and testament.
Pros and Cons of Joint Tenants Vs Tenants In Common:
Which is preferable between tenants in common and joint tenancy? While one joint ownership structure might appear more advantageous to you than another, each has perks and drawbacks. The ownership structure you and your co-owners decide on is beneficial for everyone.
The most adaptable situation for all parties is tenancy in common. Without impacting the other tenants, each co-owner can purchase, sell, and inherit their portion of the property interest. Therefore, they can quickly leave their part of the property in their estate plan. For example, their heir may receive this property portion when they pass away. A renter can quickly end their relationship with other tenants by selling or giving away their portion to a third party.
Each shared tenant is not necessarily obligated to the other owners, allowing for last-minute adjustments or unforeseen events. Parties may hold unequal property interest shares thanks to further common tenancy. The co-owners must each own an equal portion of the property in a joint tenancy. Co-owners must also transfer the deed simultaneously. Joint tenancy is more stringent than common tenancy in this regard. The property interest of a deceased co-owner is taken over by the surviving co-owner(s). Since the results are predetermined, this makes estate planning easier for the owners. For this reason, married couples who purchase real estate jointly usually employ joint tenancy.
One drawback of joint tenancy and tenancy in common is the issue of creditors. The creditor of a co-tenant who has defaulted on a loan may go after the tenant’s property to pay off the debt. The property interests could be separated and sold due to legal processes. The acts of one renter may have an impact on other tenants. Before making a legal arrangement with another person, it is usually advisable to seek legal counsel.
As you may have guessed, the decision between joint and tenancy in common might impact how you plan your estate. For instance, in the case of joint tenancy, the surviving co-owner(s) will take over your portion of the property interest. Avoiding any contradictory instructions in your estate plan is essential because, in this situation, the deed structure takes precedence over anything you wish to include in your will or trust.